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Breaking: Northern Rock Nationalized

by Jerome a Paris Sun Feb 17th, 2008 at 12:41:36 PM EST

Northern Rock to Be Nationalized

The U.K. Treasury has decided to nationalize troubled mortgage lender Northern Rock PLC in a surprise move that makes the government and British taxpayer the new owner of a financial institution that fell victim to the global credit crisis.

This is about six months too late, and will have as a consequence that the bailout is ultimately a lot more expensive, further reinforcing the notion that governments are not good at managing companies. Pathetic.


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have mostly be written by ChrisCook and can be found at his diary page

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Sun Feb 17th, 2008 at 12:51:31 PM EST
Here's the complete list of diaries and stories mentioning Northern Rock. I'll leave it to others to classify these as "core" and "tangential".

Breaking: Northern Rock Nationalized by Jerome a Paris on February 17th, 2008
Bank of England & Northern Rock by ChrisCook on February 12th, 2008
From inside the crater - Let's Keep Digging by NBBooks on January 30th, 2008
LQD: Northern Wreck by ChrisCook on January 23rd, 2008
LQD: Anglo Disease: Another Symptom? by ChrisCook on January 19th, 2008
Northern Rock around the Clock by ChrisCook on January 18th, 2008
Incompetent fuckwit ideologues! (a rant) by Migeru on January 15th, 2008
Federal Reserve Emergency Powers Being Studied by NBBooks on December 31st, 2007
Not Northern Rocket Science by ChrisCook on December 17th, 2007
Socialism?! It's called Business! by Starvid on November 21st, 2007
Tax Goes Banana's - Richard Murphy Blog by ChrisCook on November 6th, 2007
Bank of England - UnPlugged by ChrisCook on November 2nd, 2007
The Limits of Libertarianism by Helen on October 23rd, 2007
Northern Rock: Jekyll & Hyde? by ChrisCook on October 8th, 2007
Market crisis over? Banks say yes, but behave as if not by Jerome a Paris on October 4th, 2007
Mortgage Madness & Inflation by ChrisCook on September 23rd, 2007


We have met the enemy, and he is us — Pogo

by Migeru (migeru at eurotrib dot com) on Sun Feb 17th, 2008 at 04:23:00 PM EST
[ Parent ]
Jerome, can you merge this with ceebs´ diary, or viceversa?  

Our knowledge has surpassed our wisdom. -Charu Saxena.
by metavision on Sun Feb 17th, 2008 at 12:54:33 PM EST
...further reinforcing the notion that governments are not good at managing companies....

And they're right: Governments run by them are terrible at it.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sun Feb 17th, 2008 at 12:57:42 PM EST
I'm not sure who you refer to.
If you mean the current crowd, it's sadly nominally a Labor, and you can be sure that this mess will be put to the feet of the left, even though the only reason it's a mess is because that government has been following a relentless rightwing agenda for everything financial...

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Sun Feb 17th, 2008 at 01:17:21 PM EST
[ Parent ]
"Them," of course, being everyone following the "relentless rightwing agenda for everything financial."

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Sun Feb 17th, 2008 at 01:36:47 PM EST
[ Parent ]
BBC NEWS | Business | Northern Rock to be nationalised
Northern Rock is to be nationalised as a temporary measure, Chancellor Alistair Darling has said.

Neither of the two private proposals to take over the beleaguered bank offered "sufficient value for money to the taxpayer", Mr Darling said.

He said the public would gain if the government held on to Northern Rock until market conditions improved.

Ron Sandler, nominated by the government to run Northern Rock, said savers' deposits would be secure.



Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Sun Feb 17th, 2008 at 01:01:44 PM EST
BBC NEWS | Business | Northern Rock to be nationalised

The Treasury now feels that nationalisation offers the most certainty of securing these guarantees, Mr Peston said.

It is thought that the business model it proposes will be similar to those put forward by the Virgin Group and the in-house management consortium.

These were likely to see a downsizing of the bank, with job cuts likely, observers say.

The Treasury had already recruited Mr Sandler, the former boss of the Lloyd's of London insurance market, to lead Northern Rock, in case it were nationalised.

Mr Sandler is widely regarded as having restored confidence in Lloyd's after its years in financial disarray.



Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Sun Feb 17th, 2008 at 01:03:18 PM EST
This just confirms the impression we have of this government as rudderless, a victim of circumstances rather than master of elements. Brown, whose political cowardice becomes more evident by the day is too wrapped in his fears to take charge and do the leadership thing. This leads to an administration that waits too long to do less than is necessary.

Brown waited 10 years to become Prime minister and he still doesn't seem to have a clue what it is for except for the title. I thought blair was bad but brown is inconceivably worse. As most people agree a bad decision made quickly is much better than a good decision too late.

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Sun Feb 17th, 2008 at 01:17:04 PM EST
But I'd make the additional comment that Brown is labelled "traditional labor", and all his failures are linked to that not so subtly.

Everything that worked under New Labor was thanks to the rightwing ideology they spewed, and everything that went wrong is caused by the left wind policies they occasionally pursued... Being a pundit is so easy...

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sun Feb 17th, 2008 at 01:19:09 PM EST
[ Parent ]
Well, I have had a meeting in Newcastle with the boss of Northern Rock Foundation lined up for Tuesday lunchtime, but I can't see it going ahead now....

Still, this outcome is the best possible from the point of view of an unconventional approach which could save the government some face and maybe even give shareholders a better return.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sun Feb 17th, 2008 at 01:36:00 PM EST
[ Parent ]
ChrisCook:
which could save the government some face

That's the last outcome I'd expect from this.

It's a political disaster - especially for Darling, who will be moved on soon, and Brown, who has just lost the next election.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sun Feb 17th, 2008 at 02:12:20 PM EST
[ Parent ]
I don't understand the association of Brown with "traditional labour", much tho' I accept it as a real phenomenon.

Brown is a convinced neoliberal. He was converted in the mid-90s and has remained of the true faith ever since. His only ragtag protestation of labour credentials is that he was initially dubious about the Iraq invasion, largely because he saw it as a risk and he is nothing if no risk averse. Okay he was no neocon...big deal.

But that don't make a labour-ite. Heck I don't even know what a trad labour person would sound like in the 21st century, we haven't had any new ones since the 70s generation took Murdoch's shilling.

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Sun Feb 17th, 2008 at 02:29:17 PM EST
[ Parent ]
he was Blair's Chancellor for 10 years, after all.
But this is what I see in the media lately: the UK is doing badly because it's turning socialist again.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Sun Feb 17th, 2008 at 03:21:04 PM EST
[ Parent ]
In other words, the "left" has lost the battle of narratives on the financial crisis already, without firing a shot.

We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Sun Feb 17th, 2008 at 04:08:05 PM EST
[ Parent ]
I could have sworn Northern Rock Plc was a private sector failure: silly me.

You can imagine what would have been said had it been - shock horror - a mutual.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sun Feb 17th, 2008 at 04:15:38 PM EST
[ Parent ]
Isn't Brown personally responsible for demutualization? Didn't Abbey's demutualization also lead to failure a few years ago so that it ended up bought out by a foreign banking group?

We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Sun Feb 17th, 2008 at 04:47:01 PM EST
[ Parent ]
FT.com / Mergermarket: Suing over Northern Rock (February 18 2008)
Northern Rock investors may be talking tough, but they face a hard battle for compensation for the company's nationalisation. Claims in either UK or EU courts for unfair taking of private property would rest on what the shares were actually worth. The small shareholder coalitions and the hedge fund SRM contend their holdings have a book value of around 450p a share, but that claim is on thin legal ice, given the high risk nature of many Northern Rock mortgages.

Other methods of valuing the bank yield far lower numbers. Northern Rock shares closed at 90p Friday, and the Virgin bid rejected by the government amounted to about 50p per share, if a pessimistic view on writedowns are included. The government can also argue that the shares are worthless because Northern Rock would have gone into administration last autumn without government help. In the last big UK nationalisation, Railtrack's big shareholders settled for 250p per share, not far off the 280p final closing price, but well below early claims of about 400p.

If Rock shareholders can dig up evidence of ministerial lies, regulatory failures or unnecessary dithering, they could claim government negligence or misfeasance. Key episodes could include Lloyds' interest in Northern Rock before the collapse and Sunday's decision to reject the private sector bids. But misfeasance claims are hard to win, as BCCI and Railtrack shareholders found out. In the Railtrack case, the judge was not swayed by evidence that the transport secretary had misled parliament about his plans to push the company into administration.



We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Mon Feb 18th, 2008 at 10:00:29 AM EST
Jérôme, Martin Wolf Agrees with you!

FT.com / Mergermarket: Nationalising Northern Rock was the right move (February 17 2008)

Nationalising Northern Rock was the right decision. It should have happened months ago. As soon as it became evident that the stricken bank could only survive with generous public sector guarantees, any so-called "private sector solution" was a mirage. This has finally become evident to the government itself, albeit far too late.

Fortunately, many of the lessons of this debacle have already been learned. These are three: first, regulation of banks needs to pay far fuller attention to the management of liquidity; second, the deposit insurance system of the UK needs to be more generous; and, finally, the UK must have a special insolvency regime for troubled banks that guarantees insured depositors immediate access to their money.

Now comes another lesson: the only solution was indeed nationalisation, as most informed observers have long argued. Yet that decision does not end the saga. The political damage will continue, not just of last September's run, the first since the 19th century, but of the subsequent dithering. It is troubling that the government found it so difficult to make this decision, merely because it was desperate to avoid being labelled "old Labour".

I don't recall when exactly Wolf joined the "informed observers". Does anyone know?

We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Mon Feb 18th, 2008 at 10:04:41 AM EST


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